Deposit protection at banks and insurance companies – a bankruptcy protection?

securing devices are to be found there,
where there are threats to security. State supervision is also a sign of mistrust, not trust, the authors argue, asking who would feel safer there, where it is transported with a mine-proof armoured vehicle or In einem …with a nato-wire fence and an office secured by heavily-armed men? Red.


Of course there are the compensation schemes of the securities trading houses (EdW). However, the minimum protection prescribed by European law is only 90 per cent of deposits, with a maximum of EUR 20,000. Since the former largest investment fraud case “Phoenix” with a three-digit million loss, this deposit insurance is considered to be potentially over-indebted.


A nightmare for investors

Some Icelandic banks also waved investors with “dream returns” on fixed or call money – later the bank account turned out to be a nightmare. Compensation is written in the stars – at least for many investors it lies in an uncertain future.

It is therefore no wonder that in the case of bad debts, the courts have sentenced asset trustees such as “debt collection brokers” or “professional advisors” to compensate for losses of money after corresponding bank failures. The bankruptcy proceedings and/or the payment of the EdW can take many years, as practice has shown.


In the compensation scheme of the Association of German Banks (BDB), 30 percent of the bank member’s liable equity capital per customer is secured against insolvency. However, this protection only appears at first glance to be “very viable”.

Because: In and of itself it is “secret” how much money is available through the BDB’s security fund, and even more mysterious is the question of what kind of (poison?) papers these funds are invested in.

It seems certain, however, that these assets are also potentially over-indebted. A finance minister publicly estimated the assets at more than four billion euros – the bankruptcy of the German branch of the “Lehman Brothers” bank alone is said to have caused investor losses of over six billion euros.


It is questionable whether the security systems, which are intended for money and financial investments and will keep what was promised in case of emergency. 50, insurance companies in Great Britain are protected by a security system to about 90 percent – but in reality, however, the settlement can take so long and is itself connected with such imponderables that insurers or their liquidators can conclude voluntary settlements with their policyholders, which are sometimes less favourable. This makes it all the more important to know the real viability of the 5 security facilities in an emergency and, above all, to regularly check the business model and creditworthiness of the financial institution. Because even long-term, non-terminable contracts can be terminated without notice in the event of a significant economic downturn – before the company goes bankrupt.


big banks in the pillory

Numerous major banks have been involved or have been involved in investment scandals and liability lawsuits. Three-digit billions in investor money are said to have been withdrawn in the German-speaking world. In Switzerland, many billions were transferred from major banks, especially to state-owned cantonal banks.

The banker learns “money is shy as a deer”. Not every customer accepts it when a 25% or even 40% return is the target of the bank’s board of directors. One insider quotes the head of an internal audit department: “We still don’t know exactly what risks are on our books – but our business model is changing dramatically for the future.


Liability Association of the Savings Banks Group (DSGV)

Deposits and securitised receivables (for example, savings bank letters) are 100 per cent secured. Time and again, it happened that a savings bank got into trouble – then it was merged with another savings bank.

However, Savings Banks have a heavy burden: the Landesbanken – this can still cost a lot of money due to the financial market crisis.

Critics argue, not only with reference to Landesbanken, that state aid, both at home and abroad, is sometimes used to pay dividends to shareholders and performance bonuses to employees instead of effectively restructuring the banks and ending the business model of investment banking with “toxic assets”.

However, the supervisory board includes not only experienced bankers, but also politicians and deserving party members. Chief Financial Officers can also enter into stock market bets, sometimes barely noticed by the supervisory authorities, with the so-called “Depot-A”, i.e. the bank’s equity capital, as it were.

It is remarkable in this context that the financial market crisis had been known since 2007, but in some places it only became known in 2008 that the risks were gradually being brought together – even if only for an overview.


Nevertheless, this banking group is considered a winner of the crisis – deposits have increased.



Security institution of the Volks- und Raiffeisenbanken (BVR)


This banking group – which also includes the Sparda banks – is considered to have above-average stability – 100 percent of deposits are secure. in public, she advertises that you have “members”, not customers. Neither the sale of receivables from customers to “Heuschecken” is part of the business model, nor the investment of own financial resources in certificates and derivatives.

As the Internet says, “Commitments in the US real estate market do not correspond to our business model as a large German member bank and self-help institution for the public sector. Stability is more important to us than easy money.”

Here too, sweeping judgements are out of the question: In Germany and Austria, isolated, very large, cooperative banks have become known for needing state aid in the billions or for mergers.

Conversely, this means that only those who professionally examine or have their banking partner examined can strive for maximum security. On the other hand, in Germany and abroad, some institutions are protected by several protection schemes (possibly several states).


Questioning business models and conditions

It is a good long-term decision to take a close look at your bank and get answers to the following questions:

Does my bank distribute dubious media funds?

Is the remuneration of the Management Board appropriate?

Has my bank decided not to sell my loan to “Moscow Debt Collection”?

What professional training do administrative and supervisory boards have?

How often does my contact person change through job rotation?

Are interest and fees correctly accounted for?

How important is banking secrecy to me?

Are the guarantee certificates offered as a supposedly “safe” investment for conservative clients?

When does it make sense to spread the risk?




Safety device of life insurers


Protektor protects at least 95 percent of the accrued guaranteed values of life insurance policies, without any limit on the total amount.

However, capital is far from being available as a security fund to the extent that would be required in the event of the collapse of a large life insurance company.

Then all life insurers will have to inject additional capital. It is questionable whether these funds can be raised in the event of a comprehensive financial market crisis – or lead to a chain reaction of further collapses – under no circumstances can the protection system withstand every conceivable financial crisis. In extreme cases, however, the supervisory authority is also entitled to further reduce the contractually guaranteed benefits and accumulated surpluses so that they once again correspond to the diminished capital. (Editor’s note: The collateralisation of pension benefits of the bAV was presented in a detailed article in the V&S issue 1-2009, page 39 ff).

State guarantee means civil liability


When a government promises bank customers that every euro is safe at the bank, this is initially a reassurance. But if this then does not end up as a legal claim in a law, rather worrying?

One says “politically resilient” – this may mean that if the expectations raised can no longer be fulfilled, the government will take responsibility and resign. And you don’t have to be a cabaret artist to realize that all citizens, as taxpayers, are in fact liable for the misguided speculations of the unsupervised management boards of some financial institutions.


If you are internationally oriented, you can compare financial centres, the protection schemes and above all the creditworthiness. Even within Germany, you can invest your money directly with the state – for this purpose there is the Federal Finance Agency – formerly known as the Federal Debt Administration.



fuse devices – an indication of uncertainty

Safety devices are available where there are safety hazards.

State supervision is also a sign of distrust, not trust. Who would feel safer where they are transported in a mine-proof armoured vehicle or work in a nato-wire fenced office secured by heavily armed personnel?


by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm


published in Vermögen & Steuern, 02/2009, page 38-39





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Dr. Johannes Fiala Dr. Johannes Fiala

Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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